Optus Wants to be Number One

12 Mar 2015

2015 may deliver better value mobile phone services in Australia, as Telstra and Optus throw millions of dollars at creating strong and more widespread mobile networks.

Analysts at Morgan Stanley have predicted that mobile penetration in Australia is set to grow by one per cent or 100,000 new customers this financial year, with Telstra set to win the majority of new customers through its extensive networks and competitive pricing.

Yet, Telstra’s 53 per cent stranglehold on mobile network market share may decline from a 0.6 per cent revenue growth this year to a 1.3 per cent fall in 2016 as Optus and Vodafone fight to increase their customer base according to Credit Suisse telecoms research.

In January, Optus’ new CEO Allen Lew revealed plans to expand its network coverage in a bid to overthrow Telstra as Australia’s number one network.

Its goal is to reach 90 per cent of Australians with 4G in April 2015 and by 2016, Optus hopes to reach 98.5 per cent of Australians.

Professor of Finance Dr Tom Smith of UQ Business School said Optus would need to increase its capital expenditure if it wanted to deliver on its commitment.

“Telstra has spent $1-1.2 billion on capital expenditure per annum for the last 3-4 years on its mobile network, while Optus has spent $600-800 million,” Dr Smith said.

“Optus will have to spend at least as much as Telstra in order to retain its market position.”

Optus would additionally have to rebrand its product either as more affordable or as a superior network service.

“Optus needs to address its inferior coverage, and the perception it has weaker service,” Dr Smith said.

“Optus is perceived as the number one telco by less than 20 per cent of customers compared with approximately 60 per cent for Telstra.

“Optus will likely increase its stake in the market share over the next financial year – however, it is more likely that Optus will gain market share from Vodafone rather than Telstra.”